Governance reform, two years in
Recognizing that the University had grown increasingly complex since its founding, the Harvard Corporation embarked on a series of changes designed to build its capacity and enable its members to think more strategically about the future, roughly doubling its membership to 13 and creating committees to focus on core fiduciary concerns such as finance, facilities planning, and governance. As the second anniversary of those reforms approached, President Drew Faust and Senior Fellow Robert Reischauer spoke with the Gazette about progress.GAZETTE: When the governance reforms were announced late in 2010, part of the aim was to increase the capacity of the Corporation. What has happened over the past two years?FAUST: There are two things I would focus on right away. One is the work of the new committees, particularly on finance and facilities. Both include Corporation members, but also other people with special expertise in those areas. I have sat in on meetings of both committees, and in each instance I’ve seen remarkable and deep insight on major issues we’re confronting, whether they involve questions of multiyear financial planning, or how we manage financial risk in complicated economic times, or how we approach and execute major capital projects. And, apart from the committees, having a larger Corporation means having more people with more knowledge about the wide variety of issues facing the University. That has an impact on the discussions in our Corporation meetings. And it also provides me with a circle of deeply engaged advisers I can turn to between meetings when I have a specific question in areas where they have expertise. So both the new committees and the enlarged Corporation help a great deal.REISCHAUER: I think the committee structure has also served to focus and organize the efforts of those working within the University. The individuals staffing these committees have always done a first-rate job, but the new structure now gives them a clearer sense of the kinds of analyses and information we need to strengthen our decisions. So, in a short period of time, I think the University-wide decision-making processes in the financial and capital planning areas have become more sophisticated and much improved.GAZETTE: Can you point to some specific examples of better outcomes?FAUST: In facilities, I’ve seen proposals for construction and building renovation that have been markedly improved by the insights of the committee members. The Tozzer renovation project, which involves social anthropology and the related library, benefited from a number of discussions in the Facilities Committee. House renewal is another example, on a larger scale. And the committee has helped us press ahead with a much more integrated, systematic approach to capital planning University-wide. In the Finance Committee, I’ve seen analogous activity where we’ve gotten a lot of wisdom from people on issues of debt and of the University’s central bank, and on how we manage both to be ambitious and careful in more challenging economic times. Also, the committee has boosted our ability to take on more rigorous financial planning on a longer time horizon and to see the University’s financial picture as a whole, while also focusing in on particular challenges like the prospect of reduced federal research support.REISCHAUER: On the Finance Committee, we’ve discussed a number of issues — the approach to the endowment distribution, the way we think about debt, how we operate our central bank, and how we look at budgets as part of a multiyear plan, to cite a few examples where our initial, in-depth discussions have led to modifications to the original proposal. I think we’ve consistently landed in a better place than would have been the case had the issues been dealt with in a single session by a smaller group, which was the previous practice.GAZETTE: Another stated aim of the governance changes was to ensure that the Corporation could think and act more strategically and less like a management committee. Have you seen progress toward that goal?FAUST: The new structure puts real strength behind the notion of thinking about the University as an integrated entity: doing financial planning on a multiyear basis; having a University-wide budget instead of just looking at individual School budgets; having a five-year capital plan that looks across Harvard as a whole; trying to bring together the academic piece with finance and fundraising and facilities so things all fit together. A big part of the agenda now for the Corporation is how to move the institution together in a united way into the strategic opportunities in front of us.GAZETTE: What are some of those opportunities?FAUST: I’m thinking about things like innovative teaching and learning, where we’ve begun taking some important steps; planning for Allston, which gives us a real opportunity to think more holistically about Harvard’s future; and envisioning our global strategy as a University, not simply as a number of Schools or individuals acting independently. I’m also thinking about edX and the promise we see in the digital domain, and about initiatives in areas ranging from engineering to the arts, and areas like energy and the environment where we need to work across boundaries. And about how the campaign can strengthen our financial foundations and at the same time enable some important new investments and initiatives.We’re also thinking about some other challenges we face, such as the changing environment affecting federal support for research and what that means for Harvard and for higher education in the years to come. How do we think about that challenge as an institution, and how do we prepare for it and respond to it?GAZETTE: You mentioned global engagement. What are you planning on the international front?FAUST: As you know, Harvard is inherently a global institution. We have students and faculty members from all over the world, and we have a vast array of research and educational programs going on in virtually every region of the globe. We want to continue that sense of broad engagement. At the same time, we’ve been talking about the possibility of creating a limited number of “global institutes” to reinforce and extend Harvard’s presence internationally — something that’s not a campus, that’s not a degree-granting entity, but more of a center that can provide some connective tissue between scholars from Harvard and people in different regions, that can serve a convening function in other parts of the world, and help focus collaborative efforts on some academic questions of real global importance. That’s something we are actively exploring.GAZETTE: You have six new members joining the Corporation. How has the dynamic of the group changed now that its membership has nearly doubled?REISCHAUER: First of all, we should remember that the four new members who’ve already joined the Corporation since we adopted the reforms are individuals who knew a lot about Harvard, and who’d been closely engaged with Harvard in one way or another. Susan Graham, Joe O’Donnell, and Paul Finnegan all were Overseers — we knew them as fellow members of the governing boards, and they knew the issues. Larry Bacow has three Harvard degrees, and he’s someone who, as president of Tufts and before that as chancellor of MIT, was involved with Harvard in various ways. All of them have hit the ground running. It’s been very smooth. Jessica Mathews and Ted Wells will be joining us in January. We’ve had extensive discussions with them during the search process, people have gotten to know them, and, since their selections were announced, they have been getting up to speed on the issues. While they’ve been a bit less involved than some of the others were, that kind of perspective can add a great deal to the group. Having spent time with both of them, I have every reason to believe that things will go as smoothly with them as with the first four.GAZETTE: How have the changes affected the interaction between the Corporation and the Board of Overseers?REISCHAUER: I’ve been on both boards, and I think the relationship has been progressing well. We have a new joint committee on alumni affairs and development, which is co-chaired by members of the two boards. There are former Overseers on the finance and facilities committees. We work together on the honorary degrees committee, and on the inspection committee, basically Harvard’s audit committee. We’ve worked closely together with groups of Overseers on the recent Corporation searches. We’ve been having pretty regular dinners with the Overseers executive committee, including one in early December, when we’ll talk about some of the major issues coming out of the visitation process, which the Overseers direct. A number of us on the Corporation now make a point of attending the Overseers’ plenary sessions. And at this point there are six of us on the Corporation who are former Overseers, including me. And the president and treasurer are both ex-officio Overseers as well as members of the Corporation. Besides the formal interactions in meetings, I think a lot of us look forward to connecting outside meetings when we can. I think there’s a growing sense of working together as a team, and I give the recent leaders of the Overseers a lot of credit for really helping to make that happen. We had a recent reunion of the members of both boards, back in September, and it’s a pretty extraordinary group.GAZETTE: At the time the governance changes were announced, you said you were also hoping to foster more connections between the Corporation and members of the Harvard community. Has that been happening?FAUST: Three of the members of the Corporation, besides me, now are Boston-based. Larry Bacow has an appointment at the Ed School. Bill Lee is very involved with Harvard. He’ll be teaching again in January in the problem-solving course at the Law School, and he gets around to lots of events on campus. So does Joe O’Donnell, who’s also one of our campaign chairs. All of them have interactions on campus on a quite regular basis in the areas of connection that are of the most interest to them.REISCHAUER: I’m one of those who come from out of town, so I don’t have quite the same opportunities to interact on a more informal basis with people around the University. But I and others among us have made a point of trying to spend extra time here and to get around to see people when we come for meetings. And we’ve also tried occasionally to gather and have dinner with small groups of students or faculty in a very informal way. In September, several of us had small dinners with some doctoral students from the Ed School’s higher-ed program, and with students from the J.D.-M.B.A. program. In April, after we’d gone to the i-lab, we had dinner with faculty involved in various kinds of innovation and entrepreneurship. We’d planned a dinner with a group of undergraduate student leaders in late October, but that was unfortunately a casualty of Hurricane Sandy. We’ll continue to look for these opportunities. We learn a lot from them.GAZETTE: Is there any area that has revealed itself over the past two years that you didn’t anticipate as part of the reforms?FAUST: Well, we had to create a bigger room for our meetings. We couldn’t fit any longer in the old one. That was one aspect of the change that wasn’t top of mind for me when we started out. But mainly I think things have played out so far along the lines we’d hoped.REISCHAUER: The thing I’ve found unexpected is how well it’s gone. Quite frankly, I thought that, with 300-plus years of tradition, it wouldn’t be as smooth a transition as it’s been. This past spring, we did a preliminary review involving interviews with Corporation members, the non-Corporation members of the finance and facilities committees, some Overseers, and various vice presidents and others who interact regularly with the Corporation. We wanted to get their impressions of how things are going, with the intent that we would fine-tune what is still a work in progress. We discussed the review at our summer retreat, and it was quite positive on all dimensions, and also helped point toward some things we need to stay focused on.GAZETTE: Is there anything about this process that you would want to add?REISCHAUER: I think from our perspective we have a lot more confidence that we’re having a constructive impact and that we have a governance structure that’s a better fit with the complexity and the scope of the modern University, that we’ve been able to improve the quality of discussion and the advice the Corporation is providing to Drew and to other leaders at Harvard.FAUST: I’m grateful for these changes in ways that I didn’t even anticipate when we were announcing them. I just feel able to do my job much better with this added support and capacity and broad expertise and engagement. I think it’s strengthened the University immeasurably, for the long run but also in very immediate ways.