Transcript

So the transparency, I think, is very important, for a number of reasons.

First of all, just wanting to be a role model. I mean, I think in terms of what we expect our graduates to do as they go out and run companies, a good company is very clear and transparent about what its mission is, and what its finances are.

And I think similarly here we thought it was equally important that we not keep some secret around what the "formula" is here at the School. Instead, we wanted to be very clear about the fact that we do have a set of financial resources today, and we're pleased that we've been able to, through generations of donations, and other things, build these up.

But at the same time, we feel a very strong responsibility to be transparent about the fact that we're good stewards of these resources. And we thought that if we were going to ask people, through a campaign for additional funding, then we had a real obligation to be able to explain to them how we're using the money that we have today. And to make the case for why, if we want to do new and innovative things in the future—whether it's providing more financial aid for the students, whether it's doing more work globally, whatever the particular priority was—that instead of people turning and saying, "Well, you already have a lot of money. Can't you just use what you have?", we wanted to be able to, as clearly as we could, tell our story around how we do deploy the resources today, and how—to be honest—if we didn't want to do anything new, we probably did have enough money to do what we were doing, but that the School wouldn't be "Harvard Business School" if we ever stopped. If we ever didn't want to do new and innovative things.

So that was a lot of what the importance was, I think, in terms of telling the story. And I think we did break new ground, in terms of beginning to issue a financial report, an annual report. And some people were a little nervous, particularly from other schools, about the extent to which we were allowing people to see how we run the organization, and how high we might be raising the bar, and setting expectations that others, you know, might feel an obligation from their constituencies to live up to. But we didn't worry about that. We just thought that we had an obligation to our constituencies, our alumni, our faculty, our students to tell our story, and be as transparent as we could be. . . .

One of the things that I found interesting is that most of our alumni—and, you know, the largest constituency that reads the annual report are business people—so although they appreciate that we are not a traditional business, I think some people have a little trouble seeing that we don't just run the place almost in some of the same manners in which they run a business. And so I think one of the things that I've gotten a number of questions about over time, which I have tried to explain. People might say, "Well, your revenue is increasing at an impressive rate—you know, 6 percent, 8 percent, 10 percent one year to the next. And, you know, your expenses have seemed to go up, you know, proportionally, sometimes at even a faster rate. In a business, you know, we would want to maximize the profit, or in our case, a surplus. You know, why are you allowing these expenses to grow? Why don't you just..."

And so I've had to explain that we are not a business. We measure our success by the extent to which we are able to advance our mission. Educating leaders, disseminating research, having an impact on the world. The practice of business and management. And so to the extent that we do generate a surplus, and it's important that we do, it is plowed back in as investments to allow us to further advance the mission.

So whether it's hiring new faculty, whether it's beginning to offer programs, perhaps in the not-for-profit sector. We've started to do a number of things in the health care area, where we've had people from hospitals here on campus learning, and things like that. So I think it's been a little puzzling to some people that we don't just try to maximize the surplus. But that, as I've said, that is not how we measure whether we're succeeding or not.