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| High Flyer: Herb Kelleher, who will address the B-school community this Friday in Hale, has lead Southwest to a position of leadership in the airline industry. |
by Steven L. Pessagno, MBA1
This Friday, March 14, in Clayton G. Hale Auditorium, Herbert D. Kelleher will deliver an address to the B-school community as he accepts the 1996-1997 Business Leadership Award. The 38th Annual Business Leadership Award Ceremonies will commence at 1:30 p.m., and Student Government President Bjorn Haines will present the award to Kelleher, who founded Southwest Airlines Co. in 1967.
This year's award will take its place on a lengthy list of leadership awards garnered over the years by Southwest's Chairman of the Board, President, and CEO. In 1996, the American Academy of Achievement chose Kelleher to receive its coveted Golden Plate Award. As a CEO, he has been named one of America's most admired CEOs (1995) as well as the airline industry's most influential person (1994) and CEO of the year (1993) by various trade publications. Earlier this decade, BusinessWeek honored Kelleher as 1991's Best Manager.
To be sure, Kelleher's honor roll of business awards is exhaustive, running the gamut from Junior Achievement awards to distinguished performance awards in marketing and entrepreneurship.
Affectionately considered a maverick within the U.S. airline industry, Kelleher has redefined competition in the airline industry by keeping fares low and setting the highest of standards for both customer and employee satisfaction.
Since the U.S. government deregulated the airline industry in 1978, over 120 airlines have grounded themselves into bankruptcy. Meanwhile, Southwest has soared. The company employs over 24,000 persons, takes in over $3 billion in annual revenue, and is the only airline to have generated a profit in every year since 1973. Over the last 5 years, Kelleher has piloted Southwest to an enviable position within the airline industry, with the firm earning average net profits of over 5%--the highest of any airline--as traffic has swelled by nearly 30% annually. And with one of the lowest employee turnover rates (4.5% each year) in the industry, Southwest is known as one of the best airlines for which to work.
Kelleher's management style, frequently labeled "unconventional" or "outspoken" in the press, is credited with preserving Southwest's competitive advantage as a small, entrepreneurial upstart while the Dallas-based carrier has grown into a dominant player that carries 45 million passengers a year on over 2000 flights each day.
Kelleher graduated from Wesleyan University in Middletown, Conn., with honors and then went on to achieve similar academic distinction as a graduate student of law at New York University.
Currently, Kelleher's career is distinguished by his leadership roles for the Texas Transportation Institute of the Texas A&M University System (Advisory Board Committee), the Better Business Bureau of Metropolitan Dallas, Inc. (Director), and the State Fair of Texas (Director). Appropriately enough, Kelleher will be speaking about leadership in Friday's address, which will be open to the public.
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| Photo by Donald Houston |
| Lifting Up Their Voices: Members of the University Gospel Choir
sing in the student lounge last month, helping to
celebrate Black Awareness Month.
The choir also will perform this Sunday at a brunch in conjunction with the BBSA's alumni conference. |
by Duane Hart, MBA1
On Friday, March 14, the Black Business Students Association will commence its 21st Annual Alumni Business Conference. The theme of this year's gathering is "Conference 21: The Future Is Now--Achieving Excellence Through Unity, Reflection, and Renewal."
This year's conference promises to be more exciting than ever, with a delightful combination of professional and social events held at the Crowne Plaza Hotel on South State Street in Ann Arbor. The conference will kick off with a night of silky smooth jazz at The Bird of Paradise on Thursday evening.
Friday's Events
Friday marks the official beginning of the conference with the Prospective Students Day program, which will be held at the B-school in the morning. This event offers an opportunity for both prospective BBA and MBA students to learn more about UMBS and interact with current U-M students, faculty, and administrators.
The afternoon will feature an Executive Skills Workshop entitled "Rebuilding the Extended Family: The Power and Importance of Effective Networking," presented by renowned author George Fraser. Topics will include the current image of selected minorities, examining historical reasons for these images, and steps that must be taken to overcome stereotypes.
Following the workshop, several teams of current MBA students will participate in the Ernst & Young Case Competition. This competition presents an opportunity for students to interact with some of the nation's leading experts in the field of corporate strategy.
A reception with Dean B. Joseph White will precede the final activity for the day, a comedy showcase featuring several nationally known comic artists, including Jonathan Slocumb from the new Arsenio Hall show.
Saturday's Events
Saturday will feature several panel discussions on a variety of topics relevant to today's business professional.
"The Demystification of Mass Marketing" will examine the ways that distribution, consumer promotions, inner-city marketing, and advertising content can be successfully leveraged to market to a diverse population.
"The State of Race Relations in Corporate America" promises a frank discussion of the current state of race relations among employees and employers in corporate America. This panel will address recent events such as the Texaco discrimination suit and attempt to answer the question of what can be done to improve race relations.
"Doing Business on the Internet" will discuss the business opportunities available in the rapidly growing Internet computing environment. Several panel participants will relate their experiences in using the Internet to launch online businesses.
"Perspectives on Entrepreneurship" will offer a wide-reaching discussion on different facets of entrepreneurship, including idea generation, business plan conceptualization, financing, and business growth. The panel will feature successful entrepreneurs, financiers, and academicians who have taken a novel approach to institutionalizing entrepreneurship in the African-American community.
Saturday's keynote speakers will be Don Coleman, President of Don Coleman & Associates, and Keith T. Clinkscales, President and CEO of Vibe magazine. The day will conclude with a gala banquet and a party sponsored by Vibe. The conference will conclude on Sunday with a prayer service and brunch featuring the soulful sounds of the University Gospel Choir.
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The BBSA invites the entire UMBS community to participate in any and all conference events. The advanced student registration fee of $35 includes admission to all events, including the comedy showcase on Saturday night. On-site student registration will be available at the hotel for $50. Additional information about the conference is available on the BBSA website at http://www.umich.edu/~bbsa or by phone on the conference hotline at (313) 332-9111.
by Tracy Brown, MBA1
On Thursday, March 13th, Sheila Wellington, the President of Catalyst, will give the keynote presentation for the Fifth Annual Women's Forum. The presentation, entitled "Women at the Top: Measures of Progress," is open to all students. Wellington will discuss both the challenges and successes of women who pursue board membership as a career strategy.
Catalyst is the premier national, non-profit research and advisory organization on women's private sector leadership. Recent Catalyst research has included studies of women's representation on corporate boards, women in corporate management, and flexible work/family policies. The most recent study, the "1995 Catalyst Census: Female Directors of the Fortune 500," found that 81% of Fortune 500 companies have at least one female board director. Moreover, 36 companies that had no female director in 1994 had added at least one. In addition to creating a measure of success, Catalyst has publicized the issue of women in corporate governance through both the survey and awards such as the Blue Ribbon Award.
Wellington's keynote address will conclude "The Door to the Boardroom," a seminar sponsored by UMBS and the Center for the Education of Women on board membership as a career strategy. Presentations will include "Strategic Planning for Personal and Professional Success" by Assistant Professor Ruby Beale, "Building Personal Networks" by Professor Wayne Baker, and a panel discussion, "Learning the Board Game." Panel members will include Ilene Gordon, Corporate Vice President of Operations at Tenneco, Inc.; Kathy Kosmatka, Partner, Tax Practice, Deloitte & Touche LLP; Martha Seger, former Governor of the Federal Reserve Board; and Gwendolyn Hatten Stanback, Associate Director, Bear Stearns & Co. Inc. Mary Maddis, Vice President of Research at Catalyst, will moderate the panel.
Michigan Business Women, CEW, and UMBS will host a reception for students, faculty, and seminar participants following the keynote address.
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| ASEAN Panel: Ernest Bower, President of the U.S.-ASEAN Business and Technology Council, presented an overview of the nations that comprise the ASEAN trading block. Bower also discussed upcoming changes in ASEAN's membership that will affect the overall business climate. Approximately 60 persons attended the panel. (Photo by Gregory Fox) |
The 7th Asian Business Conference, held in Hale Auditorium on February 14, brought together several experts on the Asian region to share business investment strategies and trends in the fastest growing area of the world. The first half of the conference consisted of a plenary session, during which the prospects for foreign direct investment (FDI) in Asia were discussed.
The conference continued into the afternoon with three panels of speakers who spoke specifically about strategies in ASEAN (the Association for Southeast Asian Nations), India, and China. Dean B. Joseph White opened the conference, remarking on the strength of UMBS in Asian studies and on the opportunity that this conference presented for students and business people to gain a real-world perspective on issues that companies are facing as they make important investment decisions in Asian countries.
Plenary Session
Peter Walters, Group Vice President for Guardian Industries, began the plenary session with an in-depth look at the challenges and prospects that Guardian, a global leader in glass manufacturing, has faced in its growth across Asia. In the past decade, the glass industry has grown in the Pacific Rim as markets have demanded higher quality glass. Guardian jumped on this opportunity in the mid- to late-80s as it began to negotiate joint ventures in Indonesia and Thailand. Walters commented that although Guardian would prefer to have had complete ownership, sometimes a joint venture is necessary due to FDI rules and regulations across the region. However, the joint venture can be an opportunity in countries like Indonesia, where government support is an essential ingredient to a successful operation. The cultural knowledge that the indigenous partner brings to the venture is also a boon to the business.
Each country in Asia presents unique opportunities for Guardian, and the company is strategically pursuing these opportunities with these differences in mind. Being in such a highly vertically integrated industry, it is a huge risk to build a capital intensive plant in a country where Guardian has no market share. Guardian partially mitigates this risk by researching markets thoroughly before making the commitment to build. And building means more than setting up a manufacturing plant: it also may mean financing and building a marketing and distribution system in countries where there is no system in place or the current one is inadequate. Guardian has made this commitment in China, and has even reached outside of its immediate infrastructural needs by building a school for 600 children near one of its plants in India.
With so many aspects to balance--from managing the spread of technology, to meeting a country's FDI requirements, to setting up new a new distribution infrastructure--Guardian has proved to be a committed leader in the FDI arena in Asia.
Jay Chang, who serves as Vice President of the Asia Pacific Area for Johnson & Johnson International, followed Walters in discussing general investment strategies in Asia. Rather than speaking specifically about Johnson & Johnson, Chang, in a vibrant yet casual style, chose to discuss the fundamentals that drive the Asian economy. The biggest obstacles cited by Chang, particularly in China, are overcapacity, weak capital markets, poor infrastructure, and inadequate training of employees. Chang focused on the broad impact that the Chinese exert in all of Asia, with overseas Chinese in Asian countries supporting and controlling the largest percentage of Asian economies. With this point of view, Chang summed up the success of FDI in Asia as a "magic formula" of high savings rates, a hard working populous, and cheap labor. He also emphasized the cultural fundamentals that make the Chinese perfect candidates for growth opportunities; i.e., a capitalistic mindset, pragmatism and flexibility, future-orientation, patience, and open-mindedness.
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| Photo by Gregory Fox |
| India Panel: Pictured, from left to right, are Tak Wakasugi (of the Mitsui Life Research Center), Lou Speer (Goodyear Tire and Rubber Co.), Robert Cheek (Ford Motor Co.), and the moderator--Pradeep Chhibber (Professor of Political Science). |
Dr. Mustafa Mohatarem, Chief Economist of General Motors, wrapped up the plenary session with an overview of the different political, social, and economic environments in Asian countries, and commented on the obstacles that GM faces when entering various Asian countries. Specifically, Mohatarem expressed optimism about the prospects for GM's growth within ASEAN. With a rapidly growing consumer outlet and rising per capita income, ASEAN, according to Mohatarem, is the most attractive region for U.S. companies with Asian investment ambitions. In particular, Thailand, with its high growth rates and network of auto parts suppliers, has presented a true success story for GM. Mohatarem was clearly less optimistic about prospects for investing in China and India. For instance, it has been over two years since GM signed a joint venture agreement with Shanghai Auto, which has yet to come to fruition due to the lengthy bureaucratic approval system. Also mentioned were the challenges of maintaining control in an economy that is undergoing economic liberalization under a communist political system. Regarding India, the obstacles GM faces begin with India's heavily regulated economy, which is more hesitant about economic liberalization than is China. Despite these obstacles, however, the vast populations of both China and India present opportunities that cannot be overlooked.
ASEAN Panel
The ASEAN panel provided a broad overview of investment strategies in one of the world's most dynamic regions. The panel featured speakers from the US-ASEAN Business Council, Kia, and McDonald's. Linda Lim, Associate Professor of International Business and Director of the Southeast Asian Business Program, moderated the panel.
Ernest Bower, President of the U.S.-ASEAN Business and Technology Council, presented the audience with a general overview of the region which encompasses Brunei, Indonesia, Malaysia, Thailand, Philippines, Singapore, and Vietnam. The Council assists U.S. companies in facilitating business in the region by working with the U.S. and ASEAN governments to reduce trade barriers.
Bower also discussed upcoming changes in ASEAN's membership that will affect the overall business climate. Most notably, ASEAN will vote this summer to include Myanmar (formerly know as Burma), Laos, and Cambodia as formal members. This will take the current seven-nation grouping to ten countries, making it one of the largest trading blocks in the world with 580 million people.
Ray Cesca, Managing Director for McDonald's World Trade, highlighted McDonald's investment strategy in the region. McDonald's entered the region in 1971 by opening its first restaurant in Singapore. Today, the company has 370 restaurants in the ASEAN region and is planning to add 100 restaurants per year for the indefinite future. Cesca mentioned that the Golden Arches will soon be planted in Cambodia, Laos, Myanmar, and Vietnam. McDonald's recipe for success: select an outstanding local partner, become a "local" company, know the market before you enter, be a good corporate citizen, and be adaptive and flexible.
Cesca has been particularly active in lobbying to reduce agriculture tariffs in the region. McDonald's hopes to achieve economies of scale by consolidating its raw material purchasing in the ASEAN region. Looking toward the future, Cesca does not anticipate local competition slowing its growth. Jollibee, a successful Filipino restaurant chain, has gained some attention due to its aggressive expansion in Southeast Asia and the Middle East. Moreover, he did not believe Southeast Asians would tire of Western fast-food or the "values" associated with McDonald's food.
DaeChang Lee, a Research Fellow at the Kia Research Institute, discussed Kia's investment strategy in the region. Slower growth and higher manufacturing costs at home have compelled Kia to look abroad for future growth. As an example of higher costs, hourly manufacturing rates for Korean auto workers have increased from $6.63 in 1992 to $11.31 in 1996. Kia currently assembles 181,000 cars abroad and the company is planning to boost this number to 500,000 by 2003. Kia currently assembles cars in Indonesia, Malaysia, and Vietnam.
Kia's blueprints for success in ASEAN: pursue active technological cooperation with companies from other countries, establish a parts supply network, develop new technologies for future transportation needs, and develop an "ASEAN Car." Kia received considerable publicity when it partnered with President Suharto's son Tommy to win the government concession to build the "Indonesian national car."
China Panel
The China Panel included four speakers covering the auto industry, telecom, and consumer-products industries. Evelyn Simon, Vice President of Business Development & Legal Affairs for United Technologies Automotive (UTA), spoke first. Simon outlined the factors that induce multinationals to invest in developing countries. These include:
* Cheap labor (for labor-intensive products)
* Large potential markets
* A preexisting customer base
* The need to defend territory
* An attempt to gain a first-mover advantage
* Government economic regulation requiring immediate entrance to avoid being shut out
UTA entered China because two customers requested it, because of the potential large market, and because of government regulation. Forms of entry range from alliances to joint ventures to wholly owned ventures. In UTA's case, joint venture has been the mode of entry. Simon stressed that the objectives of the partners must be compatible, that relationship building must begin even before the negotiations start, and that China requires a long-term commitment.
The second speaker, Keith Davey, is also from the automotive industry. He is Director of Planing and Business Development for Ford Motor Co.'s China Operations. Davey began his talk with some interesting photos from the Ford archives, stressing Ford's long-term commitment to China. These included a picture from Henry Ford's trip to China in the 1920s, a photo of the Ford Shanghai production plant from the 1930s, and a picture of the Asian version of the Model T, which was less boxy and more suitable to Asian tastes.
The focus of his discussion fell on why Ford lost the bid for a vehicle production plant to GM and how Ford's strategy has changed since that time. Davey believes that although Ford put together a great proposal, the company did not have the relationships necessary to win the bid. Although many pressures exist in the Chinese auto industry to move fast, Ford has taken a step back to move in a more thoughtful fashion. Ford is currently focusing on building its image and relationships--guanxi--building a network of dealers and service centers, proving its component ventures successes, training and localizing management, and on two local vehicle programs. Davey stressed that success in China includes not only choosing the right partner but also being the right partner. Davey summed up his thoughts in business in China by characterizing it as a marathon rather than a sprint.
Mr. Marshall Neel, President of BellSouth China and Vice President of BellSouth International, gave his five personal rules of doing business in China:
1. In China, anything is possible
2. Nothing is easy
3. Western business rules don't apply
4. If you are feeling discouraged, see Rule 1
5. If you are feeling optimistic, see Rule 2
These rules are particularly applicable to BellSouth's business in China. BellSouth is a service provider, not a manufacturer like most telecom companies operating in China. Under current Chinese regulations, foreign service providers are not allowed to operate there. Despite this, BellSouth has a highly profitable venture in Shanghai that provides service to an industrial estate. The company also has a joint venture in Beijing that is experiencing difficulties. China is now writing a sectoral policy on the telecommunications industry. BellSouth expects that the policy will be unfavorable to foreign firms, initially requiring high investment and exposure to risk. Nevertheless, the company is focusing its Asian efforts in China to get a piece of the huge market. Neel believes that there will be companies going in under unfavorable terms that will need to be bailed out, eventually providing opportunities for BellSouth.
The final speaker was Jay Chang, alumnus and Vice President of the Asia Pacific Area for Johnson & Johnson. Chang briefly described the transformation of J&J's China business from struggling in 1990 to a highly profitable business today. He described a population of Chinese consumers who are hungry for information and for products and who are unspoiled as yet by advertising.
This can translate into an opportunity to build a strong brand image, consumer loyalty, and market leadership. Such opportunity can be enhanced by the fact that, in China, capital investment and production costs are much lower than in the West. These low costs can more than compensate for the lower selling price in China. Several of the important lessons J&J learned that allowed them to transform the business are to take a long-term view of the business and that the most important investment to make is in human resources.
India Panel
The India panel included Tak Wakasugi from the Mitsui Life Financial Research Center, Robert Cheek from Goodyear Tire and Rubber Company and Lou Speer from Ford Motor Company. Pradeep Chhibber, a professor from the Political Science Department, moderated the panel.
A finance professor at the University of Tokyo, Dr. Wakasugi opened the panel discussion with a macrolevel presentation of Japan's FDI in India. He discussed India's investment environment and its overall attractiveness as a market as compared to ASEAN and China. Wakasugi highlighted India's many strengths, including:
* A huge domestic market
* Organized legal system
* Developed capital markets
* Highly trained English-speaking labor
* An abundance of natural resources and produce
But he countered that the country's undeveloped infrastructure, unstable currency, and government regulations create market uncertainties and risks. He concluded that although the Indian market offers much potential, Japanese investors are proceeding cautiously due to memories of past investment failures and large cultural differences. Wakasugi cited three critical success factors in conducting business in India:
1. Procurement within Indian markets to avoid the high cost of imports
2. Production and labor management by non-resi- dent Indians
3. Cooperation with local companies to sell in domestic markets.
Wakasugi was followed by Robert Cheek, Manager of Joint Ventures and Technology for Goodyear Tire Company. In providing an overview of Goodyear's history in India, Cheek addressed the nature of its joint venture arrangements. Cheek also detailed the history of Goodyear's 40-year investment in India--from its initial entry as a 100%-owned entity, to its departure (when it was forced to reduce its equity stake), and to the company's eventual reentry.
Although Goodyear was one of the first tire companies in India, the firm was forced to pull out as its market position eroded from the #1 position down to #8. The company tried to work within the government's mandate that it release its technology to competitors, but it eventually found itself unable to remain globally competitive under such regulations. However, as the economy liberalized and regulations eased, Goodyear re-entered with a 50-50 joint venture.
Cheek discussed some of the drawbacks of this venture, including the difficulty of reaching an agreement when negotiating with a competitor. The company managed to overcome the conflict of interests by changing the venture into a production unit rather than a sales venture. Cheek noted that although it was initially faster to gain market entry through its joint venture partner, in the long run operating under a joint venture structure resulted in a replicated effort. One of the ways Goodyear attempted to create cohesion within its joint venture was to send Indian management out of the country to be trained in Goodyear's systems.
Cheek's presentation also highlighted the difficulty of longer term liquidity problems facing large, highly leveraged companies in India. Even though these companies are generally selected as joint venture partners because of their longstanding hold on the local market, they are often unable to match the expansion objectives of their global partners. This leads to complications in equitably distributing risk and equity in 50-50 government-mandated ventures. In such a situation, the foreign investor might have to assume a greater percentage of risk while being restricted to a relatively smaller equity percentage.
Cheek was followed by Lou Speer, Director of Indian Business Development for Ford Motor Company. Speer also described Ford's history in India, dating back to ties between Henry Ford and Mahatma Gandhi. Elucidating estimates concerning India's much touted middle class, Speer provided the useful analogy of a middle class of approximately 100 million with an income distribution approximately matching that of the population of France or the United Kingdom.
In describing Ford's strategy in India, Speer explained that by locating in Southern India, the company factored in local market incentives as well as long-term benefits of being a "big fish in a little pond" rather than vying for prominence as one of many foreign investors in a larger state. Speer maintained that he expects future growth and economic potential in Southern India.
He underscored that although much time will be spent negotiating a deal structure with the Central Government, managing the local state governments' policies will affect the actual project in terms of timing and delays. Speer warned against accepting "sweetheart" deals rather than relying on the quality of your company's investment. He noted that this is especially important in India's rapidly changing political climate. Mr. Speer surmised that the "pitfalls" of doing business in India include high taxes and duties, government regulations, and infrastructure-related issues. According to Speer, the key to making a company's equation work is to think long-term and to choose an initial partner with matching goals. In light of rapidly evolving consumer expectations, Speer cautioned against the temptation of satiating market appetite with "cheap and cheerful" products. Finally, Speer characterized Indian investment with a term he coined: "strategic sacrifice."
***
After a hiatus of three years, the Asian Business Conference was revitalized with this day of thought-provoking discussion and insight. Some students were able to take advantage of networking opportunities with the speakers, and also took advantage of the information learned by incorporating it into final presentations and assignments. Having this conference back on track will definitely play an important role in putting UMBS on the map as the leading institution for Asian business education in the nation.
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| Caricature: Dean B. Joseph White, as illustrated by Chopo Gomez-Zoebisch. |
by Mark Milstein, MBA2
In January, members of the Class of 1997 (BBAs, MBAs and evening MBAs) submitted ideas for a class gift. In February, the soon-to-be-alumni cast their votes and overwhelmingly selected the Loan Repayment Assistance Program (LRAP) as their legacy to the school. I sat down with Dean White before Spring Break to get his reaction to the choice.
How do you feel about the Loan Repayment Assistance Program being chosen by the Class of '97 as their gift to the school?
I think it's a wonderful choice. I think it's a real act of generosity on the part of our students. I'm personally committed to and enthusiastic about the Loan Repayment Assistance Program because I think that we know there are students in our program--as there are students in every top program--who would like for at least some portion of their career to work in the public or non-profit sector; bring their management skills, bring their leadership skills to the non-profit sector. But they're really barred from doing that because of the magnitude of their financial obligations when they finish here. Obviously, it's expensive to come to these programs, both in terms of direct costs and opportunity costs. LRAP makes a modest contribution to helping those students with those financial obligations in order to free them to go after something other than the highest paying job and, in particular, to go to work in the non-profit sector. I think it's about time. That's why I've put the B-school's own financial support behind the program and I think it's a wonderful choice on the part of our students.
As dean of the number one undergraduate business school in the nation and the number two graduate business school in the nation, what does it mean to you to have a program like LRAP?
I think the program is a sign of institutional maturity. It's a sign that we've reached a stage as an institution where we can think beyond the obvious, important things of providing an excellent education and ensuring there are great job opportunities. It's a sign that we can think more broadly than that and pay a little bit of attention to our civic obligations, our obligations to provide talent to all sectors of our society and not just to the for-profit sector. So, I fundamentally see it as a sign of wisdom and institutional maturity.
What other top business schools have similar programs?
Harvard, Stanford, Yale, Northwestern, to name a few. The truth is that these kinds of programs are featured in most of the top business schools. And they aren't limited to business schools. We've had a program like this in the University of Michigan Law School for some time.
How does LRAP enhance the business school experience?
Over the years, I've found that some of our most interesting students have interests that are in addition to and go beyond business. Somebody many of our students have met is Joe Petrosky who works with Focus: HOPE. Joe came here as an MBA student like everybody else, wasn't quite sure what he was going to do, got some exposure to Focus: HOPE, became committed to the mission of that organization and four years out of his MBA program, Joe is a very senior person in a very large non-profit organization. I think having the Joe Petroskys of the world in our program really enriches the total mix. I think that all the students benefit by having colleagues who have interests in addition to marketing, finance, and so on, and have an interest in the non-profit sector. Similarly, we have a number of joint degree programs, for example MBA and Masters of Social Work or MBA and Masters of Public Policy. Some of those graduates are going to want to work in the non-profit sector and bring their business knowledge and skills to the non-profit sector, at least for some portion of their careers. I think LRAP will help make that happen. It will open up opportunities in ways that wouldn't be open otherwise.
Why support graduates going into the non-profit and public sectors and not graduates going into lower paying jobs in the private sector?
It seems to me from the time our students walk into the school here, we try to strike a theme. And that theme is: our society works by having both a vibrant private sector and having very strong public and non-profit sectors because all human needs are not taken care of strictly by the market economy. At the highest conceptual level, that is the reason that we have LRAP. We need talented people going into the non-profit sector. The point is that the program is not strictly related to salary level. The program is really intended to be an incentive for people to consider non-profit jobs which, without exception, are going to be lower paying than jobs in the private sector. If somebody wants to be in the private sector in a lower paying job, that's fine. But they're still in the private sector, and potential earnings over the long run--especially for our graduates- are much higher that those in the public or non-profit sectors. If we extended the program to those people, we would be reducing LRAP's incentive effect.
So, does the name 'Loan Repayment Assistance Program' adequately describe what the program is all about?
Probably not. What is not conveyed is our goal of supporting and providing incentive for people to spend a period of time in the non-profit or public sector.
Why are class gifts important?
You can't be a top business school without an enormous amount of support from alumni and friends in the form of financial support, support in talking up the program, and support in networking among alumni. The tone is set and the habit begins by students participating in a class gift at the time of graduation. The substantive gifts are important, but symbolically, this collective commitment to support the school is extremely important. I know most people feel that we've been making a tremendous amount of progress as a school with regard to our quality and our reputation, but one thing we have to realize is that we compete against schools like Wharton, Harvard, Stanford, and Northwestern, which are private university schools with private university traditions of giving which are much greater and deeper than public universities. So this is an area where we are playing catch-up and we have to play catch-up effectively. We've been doing this in our capital campaign by raising $120 million in five years, from alumni and friends of the school, without which we wouldn't have faculty and students who enrich our school so much. The school would not be what it is today without those private donations that built all of our buildings in the 1980s, that supported the Davidson Institute, the Tauber Institute, the Erb Institute, the new building Wyly Hall, the many professorships for which people have given millions of dollars, and the student scholarships. The point is that private support is absolutely critical to our competitive success, we need our new graduates to make a collective commitment that they will support the school, and the class gift is the very best way of doing that.
When looking at a program like LRAP, some people will say, "Oh, the University should do that," implying that it is an initiative that shouldn't fall to students or graduates. What is your answer to that kind of statement?
Very simple: everything we do is a partnership. There is nothing we do "by ourselves." Dollars come from student tuition, endowment income, private support, and executive education profits. It's all of that money from all of those sources that we have to use for every single initiative that we have here. It doesn't really work if one group says, "Well, let everybody else take care of that."
The endowment needed to make LRAP a success is $1 million. How will $100,000-$200,000 from the Class of '97 make a difference?
It will make an enormous difference. First of all, that amount of money in and of itself is substantial. When you're raising money and you can get 10% or 20% of the way towards a goal, you feel like you've made a lot of progress. Second, it will serve as a very powerful statement to the private donors who we are approaching that not only does the school as an institution believe in this, but our students believe in it and they're putting their money behind it. With that support, we can get additional gifts--additional six figure gifts--that can very quickly get us to our million dollar goal.
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