Saturday, November 22, 2014

The Secret of Harvard’s Success

AHMEDABAD, INDIA – No country dominates any industry as much as the United States dominates higher education. According to Shanghai Jiao-Tong University’s Academic Ranking of World Universities, for example, 17 of the world’s 20 best universities are American, with Harvard topping the list by a substantial margin.

The traditional explanation for this phenomenon – America’s wealth, large population, generous research funding, widespread private philanthropy, and ability to attract scholars from around the world – is incomplete. Although the US boasts the world’s largest economy, it comprises only one-quarter of global GDP, and possesses roughly one-twentieth of the world’s population. And its support for research is not unique.

Moreover, according to the accepted explanation, large countries such as France, Germany, Japan, and even China and India should also be represented at the top of global university rankings. But they appear only sparsely anywhere in such rankings, if even at all.

In fact, these countries lack a crucial piece of the puzzle: America’s innovative governance model for higher education.

Harvard was established as a public institution in 1636 by the authorities of the Massachusetts Bay Colony. Its value to Massachusetts is exemplified in the Commonwealth’s post-independence state constitution, ratified in 1780, which includes a section about the university’s function and boundaries.

When Harvard alumni dominated the Massachusetts legislature, the university was given support and consideration. But, in the 1840’s, mass immigration, fueled by the Irish potato famine, altered the state’s demographic balance, enabling populists to gain control of the legislature.

Almost immediately, Harvard came under attack for being too elitist, too exclusive, and too expensive. Even its curriculum was challenged. Over the next two decades, the state increasingly impeded Harvard’s functioning by, for example, refusing to release funds and obstructing the appointment of professors. This behavior culminated in 1862, when the legislature blocked a university president’s appointment.

In response, Harvard requested that it be placed “out of the reach of ordinary political strife and change” and into the “hands of alumni who have the interests of education most at heart.” On April 29, 1865, this radical proposal scraped through the Massachusetts General Court (the state’s bi-cameral legislature), owing to intense lobbying and the goodwill generated by Harvard alumni’s distinguished service for the Union during the Civil War. Since then, Harvard’s Board of Overseers, has been controlled exclusively by alumni.

Inspired by Harvard’s success, other universities – starting with Yale University and the College of William and Mary – took similar action. This “genuine American method,” as Charles William Eliot, Harvard’s longest-serving president, called it, became the norm not only for private universities, but also for public institutions, such as the University of Michigan and Purdue University, and even religious institutions like the University of Notre Dame and Duke University.

Today, 19 of the top 20 American universities in US News and World Report’s much-watched rankings are controlled by alumni (defined as 50% or more representation on the Board of Trustees). The only exception, the California Institute of Technology, has a board with 40% alumni representation. Of the top five, three (Harvard, Yale, and Columbia) are managed entirely by alumni, and two (Princeton and Stanford) are under 90% alumni control. Alumni run the show even at public institutions such as Purdue (90%) and Michigan (63%). On average, alumni make up 63% of the boards of the top 100 US universities, both public and private.

In general, a higher percentage of alumni on the board is associated with a higher ranking, increased selectivity, and a larger endowment. After all, no group cares more about a university’s prestige than its alumni, who gain or lose esteem as their alma mater’s ranking rises or falls.

Indeed, alumni have the most incentive to donate generously, and to manage the university effectively. Given their intimate knowledge of the university, alumni are also the most effective leaders. Through alumni networks, board members can acquire information quickly and act upon it without delay.

All great universities are nonprofit organizations, created to administer higher education, which benefits society as a whole. But US universities found a way to integrate competition’s benefits into the European concept of nonprofit, or so-called eleemosynary, corporations. The lack of profit does not diminish an alumni-dominated board’s incentive to compete for prestige by, for example, hiring distinguished faculty, accepting meritorious students, and striving for athletic or artistic achievement.

Using alumni to infuse the benefits of competition into nonprofit institutions exemplifies the genius of American adaptation. Countries that aspire to compete with US universities should take note.

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    1. CommentedJohn Lott

      Independence from the government is extremely important, just as you wouldn't want the government running a car company or anything else. But how can you be sure that the important thing here is alumni control as opposed to independence per se?

    2. CommentedSalil Patil

      Nice Article. This is a proven method of building great universities. We have billion plus people in India and unfortunately no university can make in top 200. Our political class goes to the graduation ceremonies and talks about making them in top ranking year after year. Unfortunately its their influence which universities don't need. If india allows its Alma Mater to run their old schools they can make them at par with others because lot of their academia/alumni went on to get educated in these elite international institutes.

        CommentedMoritz G€d1g

        Have you considered the ranking process as a reason why India's universities rank lower than those of the USA?
        Have you considered the self-enforcing nature of the ranking?
        Have you thought about how many of the brightest Indians go to US universities? (brain-drain)
        Have you considered the cultural differences?
        This article is a joke: It is dumb to look at just one correlation in one country and draw a conclusion.

    3. Commentedjames durante

      Well, those who wish to emulate US universities might take note of America's history of land grant universities and its extraordinary commitment of tax dollars (until recently) to providing opportunities for college from students of nearly every background and set of economic circumstances.

      We realize that glorifying capitalism and competition is a pre-requisite for Project Syndicate, and this requires significant historical revisionism. Thirty or even ten or maybe even five years ago this would not have been such a big deal. But now with the private corporate model invading every corner of our once great nation, even the university, we see the results. Student loan debt now outstrips credit card debt. The debt load is highest precisely where the graduation rate and post-graduate employment rate is worst: at the new, innovative, private, for-profit institutions. The employment prospects for graduates of any universities are relatively dim as the innovative financial products of Wall St, that citadel of capitalism and competition (with its ever present government backstop), continue to hang over our heads. Gee, I wonder how many of the Wall St. wunderkids are Harvard Business School grads?