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Importance of Governance and Consultation

An elderly neighbor here in Virginia used to refer to the Civil War as “the late unpleasantness,” a term so ironic in its understatement of a complicated and bitter convulsion. These days, irony helps; maybe my neighbor will apply the term to the recent controversy at the University of Virginia around the ouster and reinstatement of President Teresa Sullivan.

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Bob Bruner

The peremptory dismissal of a yet-new President dominated our collective consciousness. But Sullivan’s reinstatement was part of a larger fabric of issues—one hopes that the University community can start to have a conversation about these. I’m pleased to see that Terry Sullivan is moving vigorously to reconcile various parties and align them around a common agenda. The sooner we can move from the “late unpleasantness” to a positive go-forward mentality, the better. I’m glad to support Terry in these efforts.

The fabric of issues was sketched in part by Rector Helen Dragas: ten challenges to the existence of the University, ranging from compensation, to state and federal funding, and to technology, among others. The significance of these is hard to argue with; they would come up on any objective observer’s list of threats. Nor are they likely to go away as the “late unpleasantness” subsides.

Now comes a publication from Moody’s Investors Services (who affirm UVA’s triple-A bond rating, the best in the field): “UVA dispute highlights emerging governance stress in US higher education.” This report is an important bellwether, for it suggests two things: a) university governance belongs among the Very Important Topics; and b) the Bond Market is paying attention. (Recall that Bill Clinton’s adviser, James Carville, once said, “I used to think if there was reincarnation, I wanted to come back as the President or the Pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everyone.”)

You need a subscription to see the whole Moody’s report, but the gist of the analysis is summarized in its opening paragraph:
While UVA’s reputation temporarily suffered from these events, the final resolution affirms the stability of the university’s faculty-centric governance model that will allow it to continue to effectively compete with the nation’s leading universities for top students, faculty, research grants and philanthropic support. For the US higher education sector overall, we expect governance and leadership clashes to increase in coming years as the sector’s ability to grow revenues dwindles, and its emphasis shifts to new operating efficiencies and cost containment. On-line learning technologies will play an increasing role in creating new efficiencies and lowering cost per student.

To simplify very greatly, the subject of governance is all about three questions: Who rules? How? And why? Answers to these questions constitute a governance model. Moody’s points out that the governance of a university is different from for-profit corporations and draws its legitimacy from engagement with the entire range of stakeholders:
Ironically, the clash between the president and some members of the University of Virginia board highlights the stabilizing effects of the counter-intuitive “shared governance” model still in place at leading US universities. Under this model, which is dramatically different from top-down corporate governance models as well as electorally-driven government models, the tenured faculty, and to a lesser extent the alumni, students and donors, have a powerful role to play in major university decision-making.

A couple of critics let me know that the “late unpleasantness” amounted to the inmates running the asylum. Well, Moody’s and thousands of others see things differently, and for good reason. A university is basically a large volunteer organization full of highly-talented professionals who have options to work elsewhere—they are “the talent” similar to the researchers, inventors, professional athletes, actors, writers, software designers who populate a host of successful fields. If you, the leader, don’t listen to the talent, you will be lonely. The glue that holds a university together is consultation among faculty, alumni, students, donors, and other stakeholders. The “shared governance model” as Moody’s describes it, works fairly well, though it doesn’t respond to shocks very nimbly.

Higher education faces a host of shocks today. Our task is to convene the processes of consultation among stakeholders before the external challenges overwhelm us. Terry Sullivan is on the case. Let us follow her lead.

About the author: Bob Bruner
Bob Bruner Bob Bruner, a native of Chicago, received a BA from Yale University in 1971 and the MBA. and DBA degrees from Harvard University in 1974 and 1982, respectively. He served as a loan officer and investment analyst for First Chicago Corporation from 1974 to 1977 and was a visiting professor at Insead, Iese and Columbia business schools before taking on the position as dean at the University of Virginia Darden School of Business in 2005.

Bruner continues to teach to this day. 2011 he will contribute to various courses and teach a seminar to first year MBA students called “Business and Success”. Bruner is one of the world’s few blogging business school deans. He comments on life, business and current events in his popular Dean’s Blog

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