Duke, Inc.

Linking academics to business was once akin to mixing church and state--hesitantly, if ever, done. Administrators spent most of their time meeting with faculty and students, deciding how best to create the nation's future leaders and worrying about politics and matters of the mind.

Although they worked within a budget, they were by no means slaves to it.

Twenty years later, the world of higher education is a different place.

Institutions are neck-deep in corporate practices, and as they compete to survive, they must do what any business does: Think efficiency first.

Universities are vying for places in magazine rankings. They are competing for faculty. They want the top graduate students, undergraduates, patients and donors. Duke is even devolving itself from traditional enterprises that no longer make money, as evidenced by the recent privatization of the last Duke-owned eateries.

"There's so much more pressure," says Robert Mosteller, former chair of Duke's Academic Council. "You can't be a sleepy little place anymore. Everybody's part of some market. Is it the research university market? Is it the excellent undergraduate college model? You just don't sit around in isolation anymore. Turnover is much quicker. Things fail much more quickly now because competition is stiffer."

The growing business presence starts from the very top, with university presidents. Recent appointments at Brown, Harvard and Princeton universities show little change in typical presidential candidates and searches, but officials say the job itself has changed.

"The nature of the job of the presidency is changing and shifting more in terms of managing large complex enterprises with multibillion dollar budgets and heavy fundraising and other [public relations] responsibilities," says Stanley Ikenberry, president of the American Council on Education. "The time presidents have to spend in traditional academic leadership roles, in working with students and faculty, sometimes gets diminished."

Behind every market are the consumers--in this case, the public. Year after year, Americans consistently list cost as a top concern when choosing a school, and governing boards, increasingly comprised of successful business people, are being forced to take notes.

"We're all probably... more conscious of the fact that everything costs more, so therefore we have to be careful about the bottom line, and we have to build our endowment," says Trustee emeritus Mary Duke Biddle Trent Semans, who served on Duke's board from 1961 to 1981. "We have to keep pace."

Donors, too, are paying attention. "Large donors are economic people, and they want to make sure their contributions are going to be appropriately and wisely used," says James McGill, senior vice president for finance and administration at Johns Hopkins University.

As a consequence, Duke administrators acknowledge that they have placed increasing value on excellent business and management skills. Provost Peter Lange says the latter played a part in the hiring of incoming Vice President for Student Affairs Larry Moneta, who has already vowed to make the division more efficient.

In a move to improve Student Affair's efficiency four years ago, its budgetary authority was transferred from the vice-president to the provost's office. Since then, though, administrators have consistently listed the Student Affairs budget as one of its greatest weaknesses.

Even faculty members are feeling the financial pressure, says Stanley Fish, former Duke English department chair and now dean of the liberal arts and sciences at the University of Illinois at Chicago.

"The older model of faculty member, someone who went about his or her business sublimely unaware of anything that was going on in the real world, is now the exception rather than the rule," Fish says. "More and more people are coming into the academy with a very good and savvy sense of how a university works."

The challenges

As financial pressure grows, faculty and administrators alike find themselves in a tough spot.

"[Sometimes people forget] that these are academic institutions with important roles and values that can occasionally be at odds with bottom-line business practices," says James Duderstadt, president emeritus of the University of Michigan and author of A University for the 21st Century.

"We still haven't found the right balance between business accountability and academic integrity."

In particular, Duderstadt points to the exploitation of athletes for the financial gain of universities.

Executive Vice President Tallman Trask says that is one problem Duke does not have. "We have our Corey Maggette issues, but we also have, year to year, the highest graduation rates of athletes," said Trask.

"It's a commitment to quality. We've been lucky. We tend to attract and retain coaches and players who are interested in what we are."

But few assert that Duke athletes are held to the same academic standards as other students. Last year, a committee reported that one in five members of the class of 2003 would not have been admitted to Duke without connections to the Office of Student Development or the Athletic Department. The group, led by Vice Provost for Undergraduate Education William Chafe, recommended cutting development spots by one-third and athletic placements by one-tenth.

In the academic realm, too, administrators can risk giving in to financial pressures too easily. Doug Breeden, dean of the Fuqua School of Business, cited the school's Ph.D. program as a prime example.

"Left in the hands of hard-nosed business calculations, you'd come up with a program that an academic would say is too small," Breeden says. "So I think that's why they're going to deans like myself who have some experience in academics and an appreciation for how essential that is as well as business experience." Breeden, a long-time finance professor, successfully started his own business in 1982 and just this month returned to academia.

Not all leaders have his vision, though. In the 1980s and 1990s, Breeden says Harvard Business School was so ill-respected academically that faculty at peer institutions barely bothered to consider the research it produced. Since then, though, Harvard has redeemed itself by recruiting star researchers, including Nobel Prize Winner Robert Merton.

Duke administrators face their own financial and academic dilemma when considering the fate of the Primate Center. Built in 1966 for two professors' research, the center now houses about 300 prosimian primates--the world's largest collection.

Now, however, the University must decide if keeping the center open meets its mission and, not surprisingly, whether it is worth the cost given the facility's current focus and productivity level--the center's staff has focused largely on conservation programs rather than core research.

Last month, following two separate reviews, Duke dismissed former Primate Center director Kenneth Glander and charged his successor, Professor of Biological Anthropology William Highlander, with refocusing the center's activities on research. Provost Peter Lange says Duke will make a final decision about the center's future in three years. Among other things, that decision will depend on the center's ability to renew a $300,000 grant from the National Science Foundation and to obtain a substantial amount of additional research grants.

The silver lining

When Lange came to Duke in 1981, the business and academic sides of the University were strictly split.

Neither side had much respect for the other, says Lange; academic deans and department chairs simply took what money they could get. But following a nationwide trend, the University changed its ways in the late 1980s and early 1990s, giving each department and division more authority over its budget.

Administrators say the new paradigm fosters greater accountability and allows the University to raise quality while cutting costs.

Ralph Snyderman, chancellor for health affairs, says that is particularly true on the clinical side of the Duke University Health System, where reimbursement patterns have forced administrators to become more efficient.

"It makes decisions more difficult, but my own feeling is that if it's done correctly, it leads to a better outcome," Snyderman says. "We have to assume resources are tight, and we have to be prudent stewards for every dollar we get to spend."

Specifically, Snyderman cites the development of clinical service units as an improvement in efficiency and quality. Four years ago, heart patients often went to several specialists in different areas of the hospital; those services have since been concentrated.

"We bundle together all our heart services," Snyderman explains. "We've increased the efficiency of the operations by focusing on what the patient experiences as they come through Duke Hospital."

A delicate balance

Many administrators and faculty say they feel Duke has maintained an appropriate blend of academic and business senses, managed through careful allocation of experts, beginning at the top.

"Qualified university presidents do not have to be financial experts when they take the job; they do, however, have to know or learn enough to assess the advice that they are given," Keohane wrote in an e-mail.

"It helps to have good judgment about people, so as to pick the right financial officers and give them what they need to do their jobs."

Many agree that Keohane struck a near perfect balance in Trask, who came to Duke in 1995 with a Ph.D. in education and a business degree. Despite his role as the University's chief financial officer, Trask has managed to garner support among faculty.

"He's very quick to look to what the policy is and not play the games I've seen some money people play," says Mosteller.

"I think we're lucky with Tallman because I think he does care about the University."

Trask and McGill say it is crucial that they maintain the respect of the faculty. George Christie, long-time Duke law professor and creator of the Christie Rule--which facilitated greater faculty input in university decisions--says faculty support legitimizes university decisions. "This is a big business, and there's a big gap between the people who run it and people on the opposing side," he said. "By getting faculty involved, the administration not only gets information, but it gets legitimacy for what its done."

Regardless of the method, administrators agree they must remain vigilant. And as the economy continues to slow, they realize it will be even more important to make sure they are making decisions based not only on the institution's best business interests but its best academic interests as well.

Sometimes, they might stop mid-track and realize they've gone too far--as Chafe's admissions committee discovered--but they will strive to make sure it's tassels on their hats they are wearing, not tassels on their shoes.