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End Note

An Avoidable Crisis

Reflections on the University of Virginia situation
University Business, July/August 2012

Relative calm now reigns at the University of Virginia after Helen Dragas, chairwoman of U.Va.’s Board of Visitors, tried to engineer dismissal of Theresa Sullivan, the university’s popular president. Now, Sullivan has retained her job, and Gov. Bob McDonnell has reappointed Dragas as Rector for a second term. Rector and president have made a public show of unity. The U.Va. drama involved poor governance practices that resulted in an entirely avoidable crisis.

Let’s focus on two of the governance issues: defining the university’s mission and the role of the board versus the role of the university president in fulfilling that mission. The substantive issues at U.Va.—diminishing public support, rising costs, technological innovations in education—are ones that all public universities face without a clear path for resolution. Constructive governance practices provide a basis for board and president to tackle the matter together, rather than as adversaries.

Like a Business

First, about mission. News reports have indicated a call by some on the U.Va. board to “run the university like a business.” But what does “run like a business” mean? There is no question that universities, like all other nonprofits, must be fiscally responsible. Fiscal pressures in turn will dictate difficult choices.

If “run like a business” means running the institution as though it were a for-profit business, then whatever doesn’t pay for itself must go. However, if ridding the university of unprofitable academic programs guides educational policy, many universities will be left only with business programs and sports teams and maybe a smattering of other disciplines needed to retain accreditation.
The fact is, universities are businesses. Perhaps the question should not be whether to run them as a business, but rather what kind of business model should be used?

Every nonprofit exists to fulfill a specific mission or set of missions. Part of a great university’s mission is knowledge creation through research and scholarship. The press has reported that the U.Va. board has called, among other things, for eliminating the Classics department. With respect to something like a Classics department, an operative question is whether, without a classics faculty, a university can achieve excellence in literature, music, art, and Biblical studies—all rooted in the classics.

If the mission includes an effort to be a top-ranked national school, willy-nilly elimination of departments may thwart that objective. The tough questions include both what business model can work to fulfill the mission and strategic objectives and how the board, in conjunction with the president, can determine that model.

Board versus Management

This brings us to the second key governance issue, namely the board’s role versus management’s role. What are the board’s and management’s roles with respect to defining mission, overseeing academics, and ensuring financial integrity? How is a strategic vision created—what must the president do, and what should the board do? Although there are some basic guidelines in answering these questions, each institution board, in partnership with the president and her staff, must determine the answer.

Transparency has been a problem throughout the U.Va. debacle, but it appears that the Rector acted less like a board chair and more like a CEO. (Side note: although she has been reappointed, the Rector’s prestige and reputation suffered enormously. She could have been the protagonist in a classic tragedy as hubris propelled her fall. Has the irony escaped notice that a Classics department would be helpful in understanding both hubris and tragedy?)

In a successful business, the board understands its roles and responsibilities, and the CEO understands his or hers. Trust is an essential ingredient, and trust does not blossom in the dark. Of course, there will be plenty of disagreement and argument, but at the end of the day, the board and the CEO must develop a working relationship in which the board challenges, oversees, monitors, and approves or disapproves policy and strategy. Hopefully, the U.Va. board will follow that path.