Beware False Sustainability

 

In my blog from last week I pointed out some ways that basic project management techniques are often at odds with the sustainability tactics, at least those documented by Rotary International. After I had posted that piece, nationally syndicated columnist George Will published an article[i] that sharply criticized a major American University whose board of trustees thought it would be a good idea to divest the University’s holdings of oil companies, all in the name of “sustainability.” (I have no idea if Mr. Will is reading my blog postings, but it was a remarkable coincidence.)

So, if a University’s trustees divesting of un-PC corporations in the portfolio is a managerially silly gesture (my words, not his), as Mr. Will maintains (and I agree), then exactly what does constitute legitimate sustainability in the business decisions of a University?  To answer that, let’s look at the business model of a typical American college, albeit at a highly generalized level.

Colleges offer advanced education. To do so, they need several things, including:

·         An adequate facility (is ivy a requirement?)

·         A faculty

·         Certifications and permits from myriad agencies, but, most important of all,

·         Students who are able and willing to pay the asking price of tuition.

To this end, most universities receive funds from sources other than their students’ tuition. The college I attended for my undergraduate work, the University of New Mexico, is a land-grant university, meaning that it was given large tracks of (then-marginally valuable) land at the beginning of its endowment. As Albuquerque grew, and more college-bound people were born in (or came to) New Mexico, this land grew in value, and was used, built-on, leased out, or otherwise leveraged to advance the University’s goals. (As an aside, the fact that UNM is a land-grant university is painfully apparent if one should play their championship golf course. Even their par-3s look like they go on for a country mile.)

Another significant source of a college’s income: donations from former students who have gone out into the workforce and used their degree(s) as a professionally valuable asset. From the University’s point of view, the more valuable the granted degree, the better the odds that the alumni will look their way when it comes time to determine the objects of their charitable dollars. So, what makes a degree valuable?

The same thing that makes any asset valuable – the ability to acquire it at a low price, and receive a substantially better return.  According to Poets and Quants[ii], a Harvard MBA should expect to earn $3.233M over a 20-year period, while a Texas A&M MBA can expect $1.782 over the same time period. However, tuition at Harvard Business School (along with other fees) can easily exceed $120K per semester. At Texas A&M, it’s a third of that. An admittedly very rough comparison yields a delta of $320K for just the graduate program. Harvard’s costs are around 14% of its 20-year yield. Texas A&M’s is only about 9%.

Interestingly, when I did a Google® search on how much a Harvard or Texas A&M MBA should expect to earn, I got a lot of hits. But when I did a similar query on degree programs for majors ending in the word “studies,” I could find no similar evaluations. I’m guessing it’s because comparing the costs of those degrees with their expected return would yield some disappointing data for those programs, meaning that the Universities that have set them up should expect fewer dollars from those alumni. And that, in turn, means that offering programs that fail to produce graduates who are prepared to create wealth is a decision against sustainability, for the University, anyway. Given its business model, the University needs to be economically viable in order to expand facilities, attract top faculty, or lower tuition. Any management decision that pushes against its economic viability is hindering its ability to sustain itself, by definition.

My point? Don’t be sidetracked by spurious claims of “sustainability.” Either the affected business model succeeds to the point that its owning organization can continue into the foreseeable future – literally sustains itself – or it does not. That’s how sustainability is determined in the management realm.