Annual Report 2009

Supplemental Information

The work of Harvard Business School is sustained by a business model that is unique among the Harvard University schools and in higher education. In a self-sustaining cycle, HBS globally disseminates the intellectual capital produced by the faculty through Executive Education programs and Harvard Business Publishing.

Sales of these offerings enable HBS to advance the practice of management, while typically generating more than 50 percent of the School’s total annual revenues. Completing the cycle, contributions from Harvard Business Publishing (HBP) and Executive Education serve as the mainstay sources of funding for the faculty’s research.

Faculty at HBS do not seek grants from outside sponsors such as government agencies, foundations, and corporations. Instead, their research is funded primarily by the School. Freedom from the constraints associated with external funding enables the School’s faculty to pursue the research opportunities they believe have the greatest potential to create new knowledge.

Revenue from gifts to HBS—in the form of endowment distributions and current use giving—has grown in recent years to more than 25 percent of the School’s total income. This growth has been driven by strong long-term investment returns on the endowment prior to fiscal 2009 and new endowment gifts, as well as the HBS community’s generous class reunion and annual giving. In general, though, HBS relies far less on endowment income as a source of revenue than other Harvard schools.

At less than 20 percent of total revenues, MBA tuition, fees, and related student income also play a relatively smaller role in the HBS business model compared with the other Harvard schools and with higher education generally.

Harvard’s schools and other operating units face a range of challenges that differ in magnitude, and thus need flexibility to shape solutions locally. Consequently, HBS sets strategic goals, administers operations, and manages its finances independently. At the same time, the School strives to ensure that local decisions take shape within a set of overarching University considerations—both academic and financial. These considerations significantly affect annual operating budgets and capital investment planning at HBS.