Revenues

HBS funds its operations with cash from three primary sources: MBA tuition and fees; earned income from Harvard Business Publishing (HBP), Executive Education, and HBS Online (HBSO); and philanthropic revenues (including current use gifts and distribution from the endowment).

In fiscal 2020, the School’s total revenues decreased by $64 million, or 7 percent, to $861 million from $925 million in the prior year. The decrease primarily reflected the impact of COVID-19 on Executive Education, which paused the delivery of programs beginning in mid-March. The topline decrease was partly offset by HBSO, which generated record revenue in fiscal 2020

MBA Tuition & Fees

Student tuition and fee revenue from the MBA Program decreased to $136 million from $140 million in fiscal 2019. First-year MBA tuition in fiscal 2020 was $73,440, held flat with fiscal 2019. In fiscal 2020, the School refunded $4.7 million of tuition to first-year students because of the cancellation of the FIELD Global Immersion course and travel as a result of COVID-19. Combined tuition and fees for fiscal 2020 were at the lower end of the seven peer schools tracked by HBS and amounted to 16 percent of the School’s total revenues.

Harvard Business Publishing

Three of HBP’s five market-facing groups, Harvard Business Review, Higher Education, and Advertising, delivered year-over-year revenue growth in fiscal 2020. This increase was offset by lower revenue from the Press and Corporate Learning. As a result, total publishing revenue remained flat with fiscal 2019 at $262 million. International revenue continued its steady growth, increasing 3 percent and representing 39 percent of the group’s total annual sales in fiscal 2020.

Fiscal 2020 was the first full year of a multi-tiered Harvard Business Review subscription offer launched in fiscal 2019 that enables a digital, digital and print, or premium subscription. As a result, HBR group sales increased 9 percent year over year. Paid circulation of 340,000 was consistent with the prior fiscal year. Through its online presence, HBR.org, Harvard Business Review offered content on global issues such as COVID-19 and the protests for racial justice. This content, together with new podcasts, special issues, sponsored products, virtual conferences, and live streaming shows, attracted a record monthly average of nearly 10 million visitors to the site.

Higher Education sales of course materials grew 3 percent from fiscal 2019. As an additional benefit to instructors, the group launched Inspiring Minds, an editorial section of the HBP website featuring practical advice and strategies from a broad range of HBS and external contributors. Revenue from Corporate Learning was down 2 percent in fiscal 2020. During the year, HBP completed six topic updates for Harvard ManageMentor®, which provides organizations with leadership development content.

Revenue from the Press, which relies on sales at airports, retail outlets, and other brick-and-mortar locations, declined 10 percent from fiscal 2019. COVID-19 significantly reduced consumer traffic at those locations, which trimmed book sales and prompted merchants to return unsold stock. Total HBP revenue amounted to 30 percent of the School’s total revenues in fiscal 2020, two percentage points higher than in fiscal 2019.

Executive Education

Executive Education tuition decreased by $76 million to $146 million in fiscal 2020 from $222 million in the prior year.

Prior to mid-March, Executive Education had enjoyed a strong year, completing four new focused programs in addition to its continuing offerings; custom programs for clients in industries including media and entertainment, the environment, and health care; and international programs in India, China, and the Middle East.

Total Executive Education tuition revenue accounted for 17 percent of the School’s total revenues in fiscal 2020, compared with 24 percent of total revenues in fiscal 2019.

HBS Online

HBSO continued to gain momentum in fiscal 2020, posting its second consecutive operating surplus since its inception in fiscal 2014. The group’s operating surplus more than doubled to $10.2 million on a 35 percent increase in revenue, which grew to $58 million from $43 million in fiscal 2019.

Expanding its portfolio with new programs, HBSO launched an Alternative Investments course and a leadership program based on lessons learned from the expeditions of explorer Ernest Shackleton. During the year, the group reached more than 29,000 asynchronous participants across the portfolio.

As part of its pandemic response, HBSO provided its Credential of Readiness (CORe) program at a discount to more than 1,000 college students who had lost jobs or internship opportunities because of COVID-19. Additionally, the group offered 10 hours of free business lessons. The offer received an overwhelming response, with more than 36,000 participants.

Fiscal 2020 also marked the second full year of the Harvard Business Analytics Program, a certificate program for executives that has attracted more than 900 participants since inception.

Total HBSO revenue amounted to 7 percent of the School’s total revenues in fiscal 2020, compared with 5 percent for the prior year.

Gifts & Endowment

Philanthropic revenue has long been vital to sustaining the School’s annual operations. In fiscal 2020, total revenue from the School’s three philanthropic sources—distribution from the endowment, unrestricted current use gifts, and restricted current use gifts—increased to $233 million from $230 million in fiscal 2019. This revenue amounted to 27 percent of the School’s total revenues, compared with nearly 25 percent a year earlier. In contrast, for the University as a whole, philanthropic revenue for fiscal 2020 amounted to 46 percent of total operating revenues.

The School’s annual endowment distribution for fiscal 2020 increased 7 percent from the prior year to $173 million, amounting to 20 percent of total revenue. The HBS endowment currently consists of more than 1,000 discrete funds established over the years by individual donors, corporations, and reunion classes. The School budgets the use of endowment distributions to support activities in accordance with the donors’ intentions and the terms of each gift.

Harvard is obligated to preserve the purchasing power of the endowment by spending only a small fraction of its value each year. Spending more than that over time, for whatever reason, would privilege the present over the future in a manner inconsistent with an endowment’s fundamental purpose of maintaining intergenerational equity.

The University executes on this obligation when determining each year’s endowment payout rate—that is, the percentage of the endowment’s fair market value withdrawn and distributed annually for operations and for one-time or time-limited strategic purposes. This rate applies to HBS and to all schools at Harvard.

Consistent with the long-term goal of preserving the value of the endowment in real terms (after inflation) and generating a predictable stream of available income, the University’s targeted annual payout range is 5.0 to 5.5 percent of market value. The payout rate for fiscal 2020 met that target at 5.2 percent, compared with 5.1 percent for the prior year.

HARVARD ENDOWMENT RETURNS

FY 20	FY 19	FY 18	FY 17	FY 16	FY 15	FY 14	FY 13	FY 12	FY 11
7.3%	6.5 %	10.0 %	8.1 %	-2.0 %	5.8 %	15.4 %	11.3 %	-0.1 %	21.4 %

The utilization of a payout formula means that the annual payout rate is generally lower following years of relatively high investment returns, and higher following years of lower investment returns. Adjustments can be made in succeeding years, keeping in mind the long-term payout goals of balancing budgetary stability with the preservation of the endowment’s purchasing power. Each year the Harvard Corporation approves the final distribution amount.

Funds within the HBS endowment, along with those of the other Harvard schools, are managed by Harvard Management Company (HMC), a nonprofit, wholly owned subsidiary of the University. HMC has managed the Harvard endowment portfolio since 1974. Its mission is to help ensure the University has the financial resources to confidently maintain and expand its leadership in education and research for future generations.

HMC has completed three full fiscal years of a planned five-year restructuring of its organization and the Harvard endowment portfolio. HMC’s early organizational efforts involved rebuilding its internal structure and culture, constructing a generalist investment team, establishing new investment processes, and putting in place new performance incentives.

HMC’s investment portfolio is evolving in parallel. Repositioning of the portfolio’s liquid assets—public equities and hedge funds—is well underway. Given the nature of HMC’s illiquid investments—private equity, real estate, and natural resources—restructuring this portion of the portfolio will span multiple years.

The return on endowment assets for fiscal 2020, net of investment expenses and fees, was 7.3 percent, compared with 6.5 percent and 10 percent endowment returns, respectively, for the two prior fiscal years.

The value of the University endowment grew to $41.9 billion in fiscal 2020—an increase of 2.4 percent from $40.9 billion a year earlier. This value reflects investment returns, net of expenses and fees, as well as cash gifts to the endowment received during the year, net of the University’s annual distributions and decapitalizations.

The fiscal 2020 year-end market value of the HBS endowment was $4.1 billion on June 30, 2020, compared with $4.0 billion a year earlier. This increase reflected the 7.3 percent return on the University endowment, less the School’s annual distribution and decapitalizations, offset by the $56 million in endowment gifts received by HBS during the year. The School did not transfer any internally generated cash to the endowment reserve in fiscal 2020, opting instead to maintain its operating surplus in cash.

HBS received gifts from nearly 8,300 donors in fiscal 2020, including MBA, Doctoral, and Executive Education Program alumni, as well as friends of the School. Approximately 20 percent of the School’s MBA alumni gave to HBS in fiscal 2020.

Total cash received from gifts in fiscal 2020, including new endowment gifts and gifts for capital construction projects, payments on prior years’ pledges, and restricted and unrestricted current use giving, was $121 million, compared with $151 million in the prior year. Cash giving to the endowment decreased to $56 million, from $76 million in fiscal 2019. Cash giving for construction projects totaled $5 million, compared with $6 million in the prior year.

Current use giving—both restricted and unrestricted—provides crucial funding for innovation across the School. Because current use gifts can be spent immediately, they have a significant impact on cash from operations and, therefore, the School’s ability to capitalize on emerging strategic opportunities. For example, current use giving has enabled the School to enhance the Harvard i-lab ecosystem, expand the reach of HBSO, and increase support for faculty research.

Growing unrestricted current use giving to a sustainable annual level of $40 million was one of the major goals of The Campaign for Harvard Business School, which concluded in fiscal 2018. In fiscal 2020, revenue from these flexible current use gifts totaled $37 million. This represented a decrease of 8 percent from $40 million a year earlier but was ahead of expectations in light of the pandemic-related economic disruption. Going forward, sustaining the HBS community’s remarkable commitment to unrestricted current use giving will be instrumental in achieving the mission of the School.

Restricted current use giving typically varies from year to year in line with the School’s changing fundraising priorities and strategic needs. Fiscal 2020 revenue from these restricted gifts decreased 18 percent from a year earlier to $23 million.

Housing, Rents, Interest Income, & Other

Total revenue from the Housing, Rents, and Other category for fiscal 2020 decreased by $2 million from the prior year to $21 million. Reflecting gradually increasing interest rates, the School reported interest income of $5 million, consistent with fiscal 2019. Total housing, rents, interest income, and other revenue amounted to 3 percent of the School’s total revenues in fiscal 2020, identical to the prior year.

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* In pursuit of greater comparability across the Harvard schools, the University has asked all the schools to report their net results in accordance with generally accepted accounting principles (GAAP) in the United States. In addition to results for fiscal 2020, the School’s results for fiscal years 2018 and 2019 are presented in accordance with GAAP within the Statement of Activity and Cash Flows.