A Look Ahead
The School's fiscal 2007 strategic investments position us for continued operational and financial strength in the year ahead. Although the economic outlook is not as uniformly positive as it was 12 months ago, we have yet to see signs of slowing demand for our programs and products.
HBS operates on a unique business model, which is described more fully in the following pages of this report. It starts with a faculty close to practice. The faculty's research brings them into contact with managers and leaders of organizations around the world.HBSP and Executive Education transform the resulting ideas into new products and programs. The income generated by this business activity is used to fund the faculty's research, thus completing the cycle and allowing it to begin anew.
HBSP and Executive Education began fiscal 2008 with highly competitive product portfolios and strong momentum in corporate and academic markets worldwide. This bodes well for the School's revenue performance, and the resulting availability of funding for education and research activity in the year ahead. In addition, the University has announced significant endowment distribution increases for fiscal 2008. These increases reflect improved investment returns on the University endowment and adjustments to the payout policy.
We expect to leverage the income growth from these market-sensitive sources in ways that further strengthen the teaching, learning, and knowledge creation that take place at HBS in the year ahead. The School's fiscal 2008 operating budget projects an increase in total expenses of 9.6 percent to $411 million, from actual fiscal 2007 spending of $375 million.
In line with Dean Light's priorities, the incremental spending will focus on our long-term strategy to expand the HBS community's global reach and impact.
The School's publishing unit also will be focusing on global expansion in fiscal 2008. Among HBSP's targets for increased investment are initiatives related to new business development and partner support in China. HBSP also plans to grow its direct and distribution channel sales capabilities in the U.K. and European markets, bring new global perspectives to its content portfolio, and integrate its product portfolio more effectively with Executive Education in both China and India.
Fiscal 2008 will be another year of growth in MBA fellowship spending, which we expect to increase by 17 percent. Including awards for MBA students and Doctoral candidates, fellowship spending is budgeted to grow by $4 million, or 18.2 percent, in fiscal 2008 to $26 million. The School remains keenly committed to ensuring that growth in fellowship awards outpaces growth in tuition, thus lowering the net cost of attendance for students who receive financial assistance.
The competition for outstanding business school faculty is becoming increasingly intense. Accomplishing the academic mission of HBS thus depends to a greater extent than ever on our ability to be progressive and aggressive in the compensation packages offered by the School to members of the faculty. Competing globally for top faculty talent also drives spending imperatives in related areas such as faculty development and leave opportunities, international travel, and research support.
Fiscal 2007 was an exceptionally successful year for faculty recruiting at the School. As a result, faculty FTEs will grow from 206 this past year to 219 in fiscal 2008, and we have budgeted a commensurate fiscal 2008 increase in compensation and faculty development expenses. The School did not see comparable growth in enrollment in the Doctoral Programs in fiscal 2007, as a result of lower admissions yield. Increasing the number of Doctoral candidates remains an important objective for HBS going forward.