[BostonCard]

I was at an "unofficial" class reunion event less than 2 weeks ago and there were several "open mic" sessions where we put our names into a hat and were encouraged to speak our minds for 3-4 minutes.  The first speaker was a respected attorney, who had been a successful prosecutor in his work years, and he immediately tore into the lack of transparency and accountability surrounding Stanford's actions on a number of fronts -- the MTL fiasco, the axing (and restoration) of 11 sports, the whole process leading up to Katie Meyer's suicide, the Pac12/ACC cloud, etc etc.  

Running a university is not like running a business, nor should it be, in that its core mission is not to produce a positive return on investment for shareholders.  That is not to say that certain aspects of running the university cannot be more efficient, and some of that efficiency can take lessons from businesses, but let's face it, even most businesses are not run all that efficiently, and it turns out that a lot of the most lucrative businesses aren't doing it by being more efficient than others but rather by setting up an deep moat and extracting economic rents.

Academia can best be thought of as a confederation of small businesses, each run by a tenured faculty member. Those faculty members are generally at the apex of their field and accept lesser salaries in exchange for lifetime employment.  Since a large share sustain themselves on grants, the university possesses neither carrots (money) nor sticks (threat of severance) that they can use to induce faculty members to do what the university wants; add to that the fact that many faculty members have an ego that comes from being at the top of their field, that they have a large degree of self governance (aka the faculty senate) and it is no wonder that the University President has limited ability to "run" the university like a business.

Finally, unlike a business, where it is easy to identify the primary stakeholders (shareholders), a University has multiple stakeholders with many different priorities (most of whom, and please don't take this the wrong way, don't prioritize athletics).  There are students, of course, but also faculty, alums, donors, the government, and patients.  Patients, you ask?  Stanford might be described as a healthcare system with a university side gig.  Last year, 61% of operating revenues came from healthcare services, compared to only 5% that came from student income, 12% that came from the endowment, and another 12% that came from grants, mostly from the US government; 58% of operating expenses went to Stanford Healthcare and Lucile Packard Children's Hospital (they are reported separately), compared to 42% which went to the University.  Athletics, by the way, is a rounding error lumped together with housing and dining services, the alumni association, and "other activities" under "Auxiliary activities", which, combined, makes up about 4% of the University's operating expenses.  "Stanford's budget during the 2021-2022 academic year was $7.2 billion, while athletics expenses totaled just over $157 million that year — about 2% of the university's budget." (link).

I hate to break it to you guys, but while athletics might have a very strong emotional appeal to the self-selected members of this board, it is mentioned exactly once in the most recent annual financial report (under the definition of "auxiliary services").  If the University were a business, athletics would be someone's legacy passion program that at most has a few vocal champions but contributes little to the bottom line, is at best a weak strategic fit, and is ripe for elimination at the next strategic reorganization.  It is only because Stanford is not run like a business that the Athletics department lives on.

BC

[BostonCard]

I was at an "unofficial" class reunion event less than 2 weeks ago and there were several "open mic" sessions where we put our names into a hat and were encouraged to speak our minds for 3-4 minutes.  The first speaker was a respected attorney, who had been a successful prosecutor in his work years, and he immediately tore into the lack of transparency and accountability surrounding Stanford's actions on a number of fronts -- the MTL fiasco, the axing (and restoration) of 11 sports, the whole process leading up to Katie Meyer's suicide, the Pac12/ACC cloud, etc etc.  

Running a university is not like running a business, nor should it be, in that its core mission is not to produce a positive return on investment for shareholders.  That is not to say that certain aspects of running the university cannot be more efficient, and some of that efficiency can take lessons from businesses, but let's face it, even most businesses are not run all that efficiently, and it turns out that a lot of the most lucrative businesses aren't doing it by being more efficient than others but rather by setting up an deep moat and extracting economic rents.

Academia can best be thought of as a confederation of small businesses, each run by a tenured faculty member. Those faculty members are generally at the apex of their field and accept lesser salaries in exchange for lifetime employment.  Since a large share sustain themselves on grants, the university possesses neither carrots (money) nor sticks (threat of severance) that they can use to induce faculty members to do what the university wants; add to that the fact that many faculty members have an ego that comes from being at the top of their field, that they have a large degree of self governance (aka the faculty senate) and it is no wonder that the University President has limited ability to "run" the university like a business.

Finally, unlike a business, where it is easy to identify the primary stakeholders (shareholders), a University has multiple stakeholders with many different priorities (most of whom, and please don't take this the wrong way, don't prioritize athletics).  There are students, of course, but also faculty, alums, donors, the government, and patients.  Patients, you ask?  Stanford might be described as a healthcare system with a university side gig.  Last year, 61% of operating revenues came from healthcare services, compared to only 5% that came from student income, 12% that came from the endowment, and another 12% that came from grants, mostly from the US government; 58% of operating expenses went to Stanford Healthcare and Lucile Packard Children's Hospital (they are reported separately), compared to 42% which went to the University.  Athletics, by the way, is a rounding error lumped together with housing and dining services, the alumni association, and "other activities" under "Auxiliary activities", which, combined, makes up about 4% of the University's operating expenses.  "Stanford's budget during the 2021-2022 academic year was $7.2 billion, while athletics expenses totaled just over $157 million that year — about 2% of the university's budget." (link).

I hate to break it to you guys, but while athletics might have a very strong emotional appeal to the self-selected members of this board, it is mentioned exactly once in the most recent annual financial report (under the definition of "auxiliary services").  If the University were a business, athletics would be someone's legacy passion program that at most has a few vocal champions but contributes little to the bottom line, is at best a weak strategic fit, and is ripe for elimination at the next strategic reorganization.  It is only because Stanford is not run like a business that the Athletics department lives on.

BC