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“It won’t surprise you to know I’ve spent a great deal of time thinking about this,” says Sir Andrew Likierman with a smile.

Figuring out future financial models for business schools comes instinctively for the dean of London Business School – a non-executive director of Barclays Bank, a professor of accounting by trade and knighted in 2001 for his work shaking up the way the UK government handles its accounts.

When he took office at LBS in 2009, Prof Likierman found that, as at many European business schools, the executive education line in his accounts was an uncomfortable read. Less than a year after the collapse of Lehman Brothers, the investment bank, business schools were noticing falls of 20 per cent amid reports that two-thirds of companies had trimmed their training budgets.

After a small round of redundancies, Prof Likierman, like deans elsewhere, knuckled down to reviewing how LBS might deliver its programmes more efficiently. “Our response to the financial crisis was not just to look at costs and then carry on as before,” he says. “The temptation for business schools is to try and do everything. But we can’t do everything – so we want to make sure that what we can do is planned carefully and done well. We’ve emerged with a very different view of what we deliver and a clearer sense of our priorities,” he says.

Those priorities include building longer-term relationships with corporate customers; focusing attention only on key markets around the world; and increasing the number of students LBS attracts – the school has lodged a planning application for development of its Regent’s Park site, and is seeking space elsewhere in London.

LBS has also increased the resources devoted to fundraising, and is gearing up to launch a campaign among alumni and donors soon, which Prof Likierman says will be bigger than anything the school has attempted before.

European business schools envy the US appetite – and tax incentives – for alumni giving, but Prof Likierman is convinced there is room for improvement on this side of the Atlantic. “I’m optimistic – we have made a huge contribution to the lives of many people and I hope they will recognise that in their generosity as we make our investments for the future.”

Across Europe, business school deans are grappling with the same ­financial headache: how to do more with less. But while there is an identifiable US funding model – large endowments, generous philanthropists, ­minimal state input – the European model is messier. Some schools, such as LBS, derive revenues from a broad portfolio of courses, but others rely on a single programme. Business schools that sit within public universities must trust in the gift of governments. Private schools’ fortunes are tied with those of their corporate customers or endowments that fluctuate with asset prices.

For example, at the European School of Management and Technology, the private university founded in Berlin by German industrialists and underpinned by an endowment of almost €100m ($137m), executive education dean Olaf Plötner says the challenge is now to get closer to what his corporate customers want “by offering more company impact, and by focusing on issues facing companies”.

ESMT is also seeking to expand its executive education offer in high-growth countries, working with companies that include Russian Railways, Shanghai Electric and Tata Motors. ESMT is now offering more educational consulting and executive coaching within programmes, and adjusting content to the specific challenges companies face.

Elsewhere, the funding squeeze is altering the sensitive relationship between business schools and public universities. In a recent poll by the Association of Business Schools, almost a third of the deans of business schools that sit within UK universities complained that the financial contribution they make to their parent institution to subsidise other, loss-making subjects is too high.

In France, the shift is more fundamental, as business school grandes écoles are encouraged to collaborate or even merge with public universities as part of President Sarkozy’s Initiative d’Excellence (Idex) to create an Ivy League (or “Sorbonne League”) of about 10 “world class” universities.

The carrot for each successful project is a state endowment of €1bn. But Pascal Morand, dean of ESCP Europe in Paris – part of the Hésam bid that includes University of Paris 1, ParisTech and the Ecole Nationale d’Administration – says that finance is not the only ­motive for collaboration. “The interest on the endowment will be around €40m, which sounds a lot, but when split between 14 different institutions is not going to make a huge difference,” Morand says. He expects the proportion of funding his school receives from the Paris Chamber of Commerce to decrease from 20 per cent to 15 per cent in the next few years. “The importance of Idex is in creating a leverage effect and incentive for institutions to work together,” he adds.

This messy diversity of European funding models should be celebrated – and supported, says Eric Cornuel, chief executive of the European Foundation for Management Development (EFMD) in Brussels, which accredits business schools against the Equis (European Quality Improvement System) ­standard. “Europe is a rich laboratory,” he says. “All the financial models are present here and we should preserve this richness, not try to reduce the complexity.

“Compared with US schools, we have more limited resources, yet European schools are well ranked. They are more global in their outlook and should receive more help from the government and corporate sectors. Europe can’t just become a national park attracting visitors because of our wine and monuments – we have something else to offer.”

But Kai Peters, chief executive of Ashridge Business School near London, says many schools may be overlooking a funding solution within their own walls. “Faculty are very expensive and many do not teach that much,” says Peters, who argues that few faculty teach more than a “2+2” – two courses of 30-45 hours a semester, each ­semester, or between 120 and 180 hours in a year. “To pay for this, schools either need to raise tuition fees or fill classes with large numbers of students,” he says. “If faculty would, instead, teach 3+3 courses, schools could either reduce fees or reduce class sizes.”


Bridging the gap

London Business School’s endowment is less than £20m, its state funding has been cut by 14 per cent and its faculty payroll is the highest in the country – £154,386 per academic, according to the Higher Education Statistics Agency. But Andrew Likierman, the dean, rejects the idea of raising tuition fees.

An MBA at London Business School costs £53,900 – not cheap, but still less than many equivalent US degrees.

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