Mr. Jefferson's university breaks up

Public Interest, Summer, 2002 by David L. Kirp, Patrick S. Roberts

By 2008, with the M.B.A. class size increasing by one-quarter, the revenues from market-rate tuition--combined with added income from fundraising and endowment interest as well as the revenues generated by a lucrative executive-education programs--will enable the school to cut most of its operating ties to the Commonwealth of Virginia. What Provost Peter Low calls "an opportunity to loosen the reins" of state control is depicted by campus administrators as a win-win arrangement. It benefits Darden by enabling it to better compete for students, faculty, money, and ultimately prestige. At least on the surface, the deal also benefits U.Va., since state money that used to go to Darden can now be spent elsewhere on campus. "This business," says chief operating officer Leonard Sandridge, "like all businesses, works best if the objectives of the various parties are aligned."

Market similes are misleading, though--higher education isn't "like all other businesses," and Darden isn't like the Saturn division of General Motors. It's not self-evident that what's good for the Darden School is also good for the University of Virginia. To the contrary, the emancipation of Darden may accelerate the fissioning of that "academical village" known as the university.

Negotiating a "franchise tax"

"When I was deciding among deanship offers," recalls former dean Tom Snyder, "I calculated the internal tax rates [the percentage of revenue that a business school pays the university]. At Michigan, the rate was 21 percent, at Emory it was 40 percent. That big variation has to affect competition among business schools." When Snyder came to Virginia, he spent 18 months negotiating the tax rate with chief operating officer Leonard Sandridge. Presumably, Sandridge did not have these comparative data at hand--he says he simply wanted a figure that wouldn't cause other deans to rebel--and Snyder walked away from the table having secured a tax rate of just 10 percent, with side payments as a sweetener. To the dean, who initially proposed a 5 percent rate, this seemed fair, since "the school doesn't make much use of university services like the library."

The 10 percent contribution to the campus is just a "franchise fee," insists Mark Reisler, Darden's associate dean for administration. The term is telling. As Provost Peter Low acknowledges, the business school is really "a separate entity that has a contractual relationship with the rest of the university, constrained only by custom." Just as a McDonald's franchise-holder pays for the cachet of the brand, Reisler regards the tax as buying the Jeffersonian mystique of the University of Virginia. Otherwise, the school operates as if it were a stand-alone institution. Snyder's predecessor pointedly skipped deans' meetings because he found them irrelevant. Undergraduates are made to feel unwelcome--signs in the classrooms emphatically declare: "For the Exclusive Use of Darden M.B.A. and Executive Education Students Only." While the business school has modestly supported some campus activities, there are few ties to the institutionally separate, and much poorer, undergraduate business school.