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Harvard Business School’s financial performance for fiscal 2011 was stronger than we expected. We completed the School’s financial plan for the year in the spring of 2010, forecasting that continued recovery from the recession and healthier conditions in the corporate sector would lead to modest levels of growth in the School’s Publishing and Executive Education businesses. Given the impending arrival of the School’s 10th dean, we anticipated that HBS would be heading in new strategic directions, with the related initial investments largely being funded by increased margin contributions from these businesses.
Although U.S. GDP growth ultimately proved to be weak and inconsistent, Executive Education and Harvard Business Publishing (HBP) outperformed both the fiscal 2011 budget and fiscal 2010 actual results on the top line. Fixed and variable costs in both businesses, meanwhile, remained well controlled, and the School’s total expenses for fiscal 2011 came in within 1 percent of budget. As a result, HBS continued to generate strong cash from operations during the year. This cash flow enabled the School to successfully execute on its teaching and research mission and increase capital spending, without drawing significantly from unrestricted reserves.
From a financial perspective, fiscal 2011 was largely a year of preparation for the launch of the “field method” that will complement the School’s traditional case method approach. Beginning in fall 2011, the new required first-year MBA course called FIELD, for Field Immersion Experiences for Leadership Development, will focus on developing meaningful small-group learning experiences that are experiential, immersive, and field-based.
During the year, the School made a $16 million capital investment in renovating the 125 Western Avenue building that will house the Harvard Innovation Lab and new FIELD classroom and meeting space. Another $4.7 million was spent to implement the campus-wide Learning Management System that now enables the faculty to address the heightened tactical challenges of field-based MBA education. Meanwhile, faculty worked intensively with the School’s I.T. staff to develop systems to support the FIELD course. Among these systems is a range of custom software tools for creating and facilitating the hundreds of small student teams that will be formed each year as collaborative learning becomes an increasingly important part of the MBA experience at HBS.
The School has long been committed to welcoming the most talented MBA students, regardless of their country of origin or their financial resources. HBS also endeavors to attract strong MBA candidates who might not otherwise consider a degree in business. In a continuing effort to improve the School’s accessibility for those applying for admission, in fiscal 2011 we made the application process more transparent and interactive, and increased the number of international interviews. HBS also continued to increase its commitment to MBA student financial aid. Average fellowship aid per student rose 11 percent to $26,745 in fiscal 2011, from $23,989 in the prior year. Over the past five fiscal years, the School’s average two-year MBA fellowship award has grown from $32,290 for the Class of 2007 to $51,800 for the Class of 2012.