Business School Announces Comprehensive Budget Reductions

Plan driven by decreased endowment revenue, a projected drop in executive education revenue, and an expected decline in alumni-giving.

January 01, 2009

In response to decreased endowment revenue, a projected drop in executive education revenue and expected alumni-giving declines, the Graduate School of Business announced a comprehensive expense reduction plan on Tuesday.

The declining revenue sources, triggered by a financial downturn of unprecedented reach and scale, have created a $15 million (10 percent) shortfall in the current year budget at the Business School. Moreover, impacts are expected to persist due to the effects of the recession on Business School revenues.

The endowment payout will continue to decline more over the next two years as the full impact of the decline in asset values is reflected in the payout. “We’re essentially looking at an endowment revenue decline for three years,” said Dan Rudolph, senior associate dean for operations.

Academic priorities were protected as part of the strategic budget process, including student programs, the new MBA curriculum introduced in 2007, financial aid, the Sloan Master’s Program, faculty research and the school’s PhD program.

As part of the plan to reduce expenses, 49 staff members (approximately 12 percent) were laid off. Another eight people were put on a reduced schedule, and 12 contractor or fixed-term positions were eliminated. Expenses such as travel, food, library services, marketing activities and printing, among other things, also were cut.

“This was the most painful decision I have had to make in my nearly 10 years as dean,” said Robert L. Joss, dean of the Graduate School of Business. “We regret the need to lay off staff members who have been dedicated to the school and its educational mission, but by cutting expenses now we can ensure our long-term financial health. Every effort will be made to support employees as they transition out of our workforce.”

Laid off staff members will receive an enhanced university severance package, as was previously announced by the campus for all employees who may be laid of between now and June 30. The affected employees also will receive severance based on length of service and five months of outplacement job search support, as is standard campuswide. Outplacement specialists were at the school on Tuesday to provide information and support as employees learned of their layoffs.

Overall, Stanford University endowment results are expected to be down between 20 and 30 percent this year, according to estimates from Provost John Etchemendy. By contrast, during the 2001-03 downturn, the Stanford endowment was down about 5 percent over two years. The Business School has been especially hard hit, as a larger proportion of its revenue comes from the endowment and alumni giving than in some other areas of the university.

With these cuts, the Business School has put a plan in place to ensure future financial stability. In a Jan. 7 Q&A in Stanford Report, the provost said that it is important to remember that even with a 20 to 30 percent investment decline, the university’s endowment would be about the size it was in 2005. It was a great university then and it will remain a great university in 2010, he said. The same is true of the Business School, Joss said.

By Barbara Buell

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